PCI rules out consumer charges on UPI payments

The Payments Council of India said UPI will continue to remain free for consumers. The industry body also said small merchants such as kirana stores and local vendors will stay protected from any merchant discount rate. The Finance Ministry issued a separate clarification that consumers will not be charged for UPI payments and that person to person transfers remain free. Finance Minister Nirmala Sitharaman said MDR applies only on the merchants and not on the end users or customers.

This is a scope clarification, not a rate decision. The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026 on August 6, inserting an enabling provision into the Payment and Settlement Systems Act, 2007. Inc42 reports the government is expected to levy MDR of 0.25% to 0.4% on business UPI transactions above Rs 2,000. That is an expectation, not a notified rate. The UPI and Services Steering Committee, chaired by NPCI, has yet to decide on MDR, and PCI is a trade body whose statement carries no statutory force.

Payment company founders backed the consumer carve out. PhonePe chief executive Sameer Nigam said UPI is and will remain free for all Indian consumers and that consumers will not be charged. Razorpay chief executive Harshil Mathur endorsed consumer protection and small business exemptions. Pine Labs chief executive Amrish Rau took the other side of the merchant question, arguing that zero MDR slowed growth and that infrastructure investment has climbed 300% recently.

For a D2C brand the number that matters is the Rs 2,000 threshold, because it turns average order value into a payments cost variable. If the slab lands as described, a Rs 2,100 cart attracts MDR while two Rs 1,050 carts do not. Brands sitting just above the line should look at how bundles and quantity breaks push carts across it. Pull your last twelve months of UPI collections and compute the share of GMV above Rs 2,000. That number sizes your exposure before any rate is notified.

Second, note who the protection covers. PCI named consumers and small merchants. A funded D2C brand collecting crores a month is neither, so do not read the free UPI headline as applying to you. Build the 0.4% case into your FY27 contribution margin model and ask your gateway how it plans to pass the charge through.